"We identified over 100 possible candidates talked with several dozen and then focused our energy intensely on a group of about 20 individuals," Microsoft board member John Thompson said in an update posted online.

"As you would expect, this group has narrowed. We're moving ahead well, and I expect we'll complete our work in the early part of 2014," Thompson said.

Outgoing Microsoft chief executive Steve Ballmer last month said the computer giant had to reinvent itself as the company struggles to keep up in the mobile devices sector. "Unless you're constantly inventing something new, you're old and tired," Ballmer said at a conference in Rome.

Ballmer was a classmate and friend of Bill Gates from their days at Harvard University in the 1970s. He took over from Gates in 2000 but earlier this year said he will step down by August 2014.

When Ballmer took over, Microsoft was the undisputed tech sector leader and the world's largest company in market value. But in the recent years, it has struggled as consumers began to move from desktop and laptop PCs to mobile devices.

"Microsoft has had only two CEOs in its 38-year history," Thompson said. "We are determined and confident that the company's third CEO will lead Microsoft to renewed and continued success," he added.